Keynotes

A medical opinion regarding the degree of stenosis is a subjective fact incapable of confirmation or contradiction.
Without a proven false statement, circumstantial evidence may not be enough to show fraudulent intent beyond a reasonable doubt.
Nevertheless, the defense of subjective medical judgment is not an absolute shield against health care fraud charges.

On March 7, 2017, the U.S. District Court for the Eastern District of Kentucky reversed the October 27, 2016 criminal jury verdict against Kentucky cardiologist Dr. Richard E. Paulus, and acquitted him on all counts of health care fraud and making false statements in connection with allegedly unnecessary stent procedures that he had performed as the chief cardiologist of King’s Daughters Medical Center (KDMC). Significantly, in doing so the Court found that a medical opinion regarding the degree of stenosis is a subjective fact incapable of independent confirmation or contradiction. It thus held that the government cannot prove fraud beyond a reasonable doubt by merely relying on the testimony of medical professionals who disagree with the interpretation of the underlying angiogram. The Court’s opinion is consistent with Pillsbury’s own legal analysis of the controversy over prosecuting medically unnecessary stenting, which recently appeared in the ABA Criminal Justice Magazine.

DOJ Prosecution of Medically Unnecessary Stent Procedures

In 2014, KDMC, a Kentucky hospital that had been among the country’s leaders in the rate of coronary artery stenting, agreed to pay over $40 million to the government to resolve allegations that, among other things, it submitted false claims to the Medicare program for medically unnecessary coronary stents. In particular, the government alleged that, between 2006 and 2011, KDMC had billed for numerous supposedly unnecessary coronary stents and diagnostic catheterizations performed by its physicians on Medicare patients who did not need them, thus allegedly generating millions of dollars in Medicare reimbursements. As part of its settlement with the government, KDMC also agreed to undertake substantial internal compliance reforms and commit to a third-party review of its claims to federal health care programs for the next five years.

While concluding its investigation of KDMC, however, federal prosecutors also chose to indict Dr. Paulus, charging him with one count of health care fraud and 26 counts of false statements related to health care matters. According to the government, Dr. Paulus had performed more stent placement procedures than any other cardiologist in Kentucky and, at times, more than any cardiologist in the United States, and allegedly billed for medically unnecessary cardiac stent procedures on hundreds of his patients. Specifically, the government alleged, among other things, that Dr. Paulus had placed stents in over seventy patients whose blockages were significantly less than 70 percent—the general threshold of the Centers for Medicare & Medicaid Services (CMS) for approval of carotid artery stenting procedures—while recording the blockages at or near 70 percent in order to receive payment for the procedures. On October 27, 2016, after 23 days of trial and four days of deliberations, a federal jury in Covington, Kentucky convicted Dr. Paulus of one count of health care fraud and ten counts of making false statements in connection with the placement of coronary stents during his tenure at KDMC.

“There is More Than Meets the Eye”

In overturning Dr. Paulus’s jury conviction, the Court primarily focused on two elements common to both counts: falsity and fraudulent intent. Specifically, the Court analyzed the testimony offered by medical expert witnesses called by the government who reviewed numerous angiograms of patients on whom Dr. Paulus had performed stent procedures, and testified during his trial that their level of arterial blockage was lower than what Dr. Paulus had recorded. While the government pointed to such discrepancies as evidence of Dr. Paulus’s “fraud,” the Court concluded that the scientific evidence and expert opinion testimony presented by the government did not prove falsity, but rather established that when it comes to angiography, “there is more than meets the eye.” Indeed, noted the Court, the disagreement between the parties could be distilled down to one issue: whether the degree of stenosis is an objective fact, which can be false, or a subjective opinion, which is not subject to proof or disproof.

The Court found that the evidence presented at trial demonstrated that interpreting angiograms is a difficult task and that cardiologists frequently disagree with one another regarding the degree of stenosis. Moreover, added the Court, inter-observer variability could very well account for significant differences between doctors’ interpretations. Indeed, at times the evidence showed that a cardiologist could entirely miss an artery that another cardiologist believed was “completely blocked.” For instance, the Court found that for one particular patient, the medical experts’ estimates of stenosis varied up to 24 percent, which was over the 20 percent maximum difference caused by inter-observer variability claimed by the government. Put in context, the discrepancy between these medical experts was approximately as large as the discrepancy between Dr. Paulus’s estimate and the government experts’ higher estimate.

“This House of Cards Falls Apart”

As part of its analysis, the Court relied on several False Claims Act cases which consistently held that medical opinions cannot be objectively false, and it found that expert testimony and angiogram evidence had established that the degree of stenosis is a subjective medical opinion, incapable of confirmation or contradiction. Consequently, the Court found that a reasonable jury could not have concluded beyond a reasonable doubt that Dr. Paulus had made a false statement, as opposed to having a good faith difference of medical opinions with other medical experts.

The Court then held that the circumstantial evidence that was presented during Dr. Paulus’s trial—high volume of procedures, KDMC stent trends before, during, and after Dr. Paulus’ tenure, statements by co-workers that they believed the stent procedures were unnecessary, patient testimony, Dr. Paulus’s profits, an anonymous complaint to KDMC, and Dr. Paulus’s retirement agreement—was insufficient to permit a reasonable jury to infer that Dr. Paulus acted with fraudulent intent. In particular, opining on the government’s theory of fraudulent intent, the Court found that “without a proven false statement, this house of cards falls apart.”

Hiding Behind “Medical Judgment”?

While granting Dr. Paulus’s motion for judgment of acquittal, the Court recognized that if every doctor could hide behind the guise of subjective medical judgment, the health care fraud statutes would be rendered useless for prosecuting unnecessary services fraud. Therefore, the Court noted that where the necessity of the service is capable of confirmation or contradiction and the doctor’s stated “opinion” can be proven to be objectively false, that case—if proven beyond a reasonable doubt—can sustain a conviction. However, concluded the Court, that was not Dr. Paulus’s case.

Practical Implications for Health Care Companies and Physicians

While the Court’s recent reversal of the criminal jury verdict against Dr. Paulus will likely provide additional guidance to prosecutors, health care companies and physicians, the controversy over medically unnecessary stenting will certainly continue within both the legal and medical communities nationwide.

Indeed, while hard and fast rules such as CMS’s 70 percent threshold may provide convenient enforcement tools, they also raise concerns about the appropriateness of questioning a physician’s judgment, such as that of Dr. Paulus, and criminally prosecuting physicians based on hindsight that might not have been available during treatment, especially where there is no evidence of deliberate falsification of patient records. This is particularly true where, as here, the state of the available medical technology is still insufficient to produce unequivocally objective medical interpretations.

However, as the federal government continues to focus on heart stents because of the supposedly “clear” standards governing their use along with the high cost of the procedure, doctors and hospitals around the country should expect increased government inquiries into their stenting practices and testing procedures.

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